Elisse Walter, current member of the Securities and Exchange Commission / Alex Wong, Getty Images

by Paul Davidson and Tim Mullaney, USA TODAY

by Paul Davidson and Tim Mullaney, USA TODAY

Securities and Exchange Commission Chairman Mary Schapiro, who announced her resignation Monday, was a politically savvy negotiator who guided the agency through the tumult of the financial crisis, but she failed to change an SEC culture that was often too beholden to industry, SEC observers say.

Schapiro said she'll step down Dec. 14 after nearly four years in the post. President Obama appointed SEC Commissioner Elisse Walter, a close ally of Schapiro on the panel, to replace her and Walter could hold the spot until December 2013.

The White House says it will announce a permanent replacement in the near future. Walter is likely a candidate, analysts say.

Schapiro, 57, the first woman to serve as the SEC's permanent chairman, in early 2009 took the helm of an agency staggered by the financial crisis and embarrassed by its failure to uncover Bernie Madoff's Ponzi scheme.

She faced a skeptical public, a polarized commission and an irate Congress that spoke of disbanding the SEC. Schapiro ensured its survival.

"I don't believe any SEC chairman has had a difficult or painful a job as she had," says John Coffee, Columbia University Law School professor. "She was largely in damage control, trying to keep the SEC alive" after its budget had been slashed.

In a news release, the SEC said that under Schapiro it brought a record 735 enforcement actions in fiscal 2011, and 734 in fiscal 2012. It also prosecuted the largest insider-trading scheme in its history, winning a record $92.8 million fine in the case against Raj Rajaratnam, the CEO of Galleon hedge fund.

Schapiro, who first served on the SEC as a commissioner from 1988 to 1994, also has overseen the plodding implementation of sweeping Dodd-Frank financial reform following the crisis, including new rules on executive compensation and the orderly dissolution of so-called too-big-to fail banks.

"She has always had a sense of what was doable" and worked with Congress to achieve it, Coffee says. "She was good at brokering compromise."

Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee, says Schapiro "took office under extraordinarily difficult circumstances, but proved up to the challenge. She inherited an agency undergoing a crisis of confidence, and restored its stability and its standing."

But amid aggressive lobbying from the financial services industry, key parts of the law have been delayed. Those include regulation of money market mutual funds and derivatives, as well as the Volcker Rule, which is aimed at stopping banks from making big risky trades with their own money.

The financial crisis occurred after banks too leniently approved home buyers for mortgages, then sold the mortgages to investment banks that bundled them into securities, which were sold to investors. The housing bust triggered the failures of companies such as Lehman Bros. and Countrywide Mortgage and virtually froze the financial system for a brief period.

Dennis Kelleher, president of A Better Market, a Washington-based advocacy group for smaller investors, says Schapiro failed to change the initial perception that she was close to the industry she was regulating.

For example, Kelleher says the money the SEC recovered after the financial crisis is trivial compared with the sums investors lost. The SEC's annual report for fiscal 2012 notes that the agency has collected $2.2 billion in fines and disgorged profits from 80 enforcement actions related to the meltdown.

In a case involving Citigroup's underwriting of mortgage bonds called collateralized debt obligations, for example, the $285 million the SEC recovered is dwarfed by the $700 million investors lost, Kelleher says. An SEC spokesman said the agency believed the settlement represented most of the amount the agency would have recovered in court.

``Wall Street remains a high-crime area that's largely unpoliced,'' Kelleher says. ``They let the whales get away and went after minnows.''

Schapiro also abandoned efforts to reform the money market mutual fund industry, which required $3 trillion in federal guarantees in 2008 and 2009 after institutional investors began withdrawing billions of dollars, leaving little money to cover the claims of small investors.

The SEC drafted proposals to impose capital standards on money funds and require the funds to mark the value of their investments to market. But Schapiro didn't bring up the recommendations for a vote last summer, saying in a statement that she didn't have the support of a majority of commissioners.

Kelleher called Schapiro "a brave advocate in taking on the mutual fund industry."

Former senator Ted Kaufman, a Delaware Democrat and key backer of the Dodd-Frank act, says Schapiro also fell short in efforts to curb high-frequency trading after the "flash crash" in 2010 led to a steep plunge in stock markets.

The commission's new rules fail to require brokers to provide records detailed enough to allow regulators to determine whether or not prices were manipulated, Kaufman says.

And a proposal by the SEC and other agencies on the Volcker Rule is so weak that it may have allowed JPMorgan Chase to make the same bet on credit derivatives that led to a $6.2 billion loss earlier this year, Kaufman says.

"It's a perfect example of not changing the culture,'' Kaufman says. "They wrote a rule that will have no impact."

Adds Chris Whalen, senior managing director of Tangent Capital Partners, "She could have been more active using her bully pulpit to draw attention to fraud."

Schapiro's successor, Walter, 62, has worked for Schapiro for most of her career at the SEC, the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority. "Their world views are pretty similar," Coffee says. While Walter may be a slightly tougher enforcer, "I'm not sure she has the political skills of Mary Schapiro," he says. "She may have a tougher time with Congress."

In a 2009 interview with USA TODAY, Walter said, "I really do like wearing a white hat and riding the white horse." She added that devising the ideal enforcement strategy is often like working a puzzle.

Other possible candidates to replace Schapiro longer-term include Mary Miller, a high-level Treasury Department official and former mutual fund executive.

Obama should pick a consumer-friendly SEC chair, rather than an industry figure such as Miller, says MIT professor Simon Johnson, former chief economist of the International Money Fund. He named Kaufman, Kelleher and Neal Barofsky, former special inspector general for the Troubled Asset Relief Program (TARP), as good candidates.

"It's not about being confrontational, it's about enforcing the law,'' he says. "The SEC was in the pocket of the industry in the early 2000s and the pendulum needs to swing the other way."

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